Euro exit ‘would cut Greeks’ pay in half’

An EXIT from the euro would see Greeks lose more than half their annual income and prompt a dramatic rise in unemployment and inflation, a report from the Bank of Greece has warned.

An EXIT from the euro would see Greeks lose more than half their annual income and prompt a dramatic rise in unemployment and inflation, a report from the Bank of Greece has warned.

The study was published last night ahead of a general election next month, with concern of financial turmoil if Greece’s place in the single currency is threatened by a victory for an anti- austerity party.

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“An exit from the euro would cause a significant drop in the living standards of Greek citizens – with a reduction of at least 55 per cent in per capita income,” the authors of the report wrote.

“This would affect those on a lower income the most, with a significant devaluation of the new currency, by 65 per cent, and financial contraction of 22 per cent on top of the [GDP] reduction of 14 per cent that occurred between 2009 and 2011.”

The central bank report also warned that if Greece did exit the euro, unemployment would rise to 34 per cent, while inflation would hit 30 per cent and then higher.

Unemployment in Greece stands at about 22 per cent, while inflation is 2 per cent.

However, news that New Democracy had taken a slight lead in the weekend opinion polls sent shares on the Athens Stock Exchange up by 6.9 per cent on Monday and a further 1.9 per cent yesterday.

“New Democracy has regained the lead in several opinion polls, ahead of its main rival, the left-wing Syriza party. Given that the party that comes first in the election gets a 50-seat bonus in the 300-member parliament, coming first is crucial,” Martin Koehring of the Economist Intelligence Unit said.

He said the next government would face “a very challenging fiscal austerity agenda.”

However, he added: “It is likely that a new government will be able to get some concessions on the pace of implementing the agenda.”

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